Nvidia CEO Jensen Huang Said AI's "Most Profound Impact Will Be in Life Sciences." Does This Bet on a Biotech Stock Prove He Means It?
Key Points
The chipmaker has active interests in the healthcare market, including a partnership with Eli Lilly and an investment in small biotech Generate Biomedicines.
Nvidia CEO Jensen Huang sees a powerful intersection between health and AI.
Nvidia (NASDAQ: NVDA) is known as one of the most advanced makers of chips powering the breakthroughs in artificial intelligence (AI). But what some people may not know is that Nvidia is also an investor in other companies.
Among its investments, it holds stakes in cloud computing provider CoreWeave, chip designer and manufacturer Intel, and telecommunications company Nokia. But at the bottom of one of its May financial filings, it also listed an investment in a small biotech company: Generate Biomedicines (NASDAQ: GENB).
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That may not seem to fit the pattern of investing in tech operators. But Nvidia CEO Jensen Huang sees an important intersection between the healthcare field and AI.
Image source: Getty Images.
AI's role in the future of healthcare
At a January conference, Nvidia announced it was forming an AI co-innovation lab with Eli Lilly. Over five years, both companies plan to jointly invest up to $1 billion in the lab's infrastructure and research.
For the collaboration, Eli Lilly will bring its medical expertise, while Nvidia will contribute its AI know-how to expedite drug research. "AI is transforming every industry, and its most profound impact will be in life sciences," Huang said in Nvidia's press release.
With that as a reference point, there's a natural fit for Nvidia to invest in Generate Biomedicines.
Combining AI and machine learning with healthcare
Generate Biomedicines uses AI and machine learning to accelerate drug development and deliver novel medical solutions.
For instance, drug candidate GB-0895 is designed to help treat asthma and could reduce treatment frequency from once a month to just twice a year. Phase 3 trials for GB-0895 as a treatment for severe asthma are currently underway.
As Nvidia looks to show its chips can be used for more than just powering chatbots, healthcare is a natural fit. Its hardware could be involved in everything from processing clinical trial data to drug discovery to robotic-assisted surgery.
Should you follow Nvidia's investing lead?
Nvidia's May 13F filing showed that as of the end of the first quarter, it owned just over 833,000 shares of Generate Biomedicines, a stake valued at $10.4 million. For a company with a $4.9 trillion market cap, that may not seem like a significant investment. To be fair, it's not, but it's still a smart investment by Nvidia.
There's a lot of promise in using AI in the healthcare sector, but there are also plenty of risks, along with even more unknowns. With a relatively small investment, however, Nvidia can give Generate Biomedicines more financial wiggle room to commercialize its drug pipeline.
If Generate Biomedicines can commercialize its drugs, even though Nvidia's stake is small, it would be a financial win for Huang's company. But even more importantly, it would be a proof point of how AI powered by Nvidia's chips is helping uncover medicines that go on to be commercialized.
Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly, Intel, and Nvidia. The Motley Fool has a disclosure policy.